Boral sticks to its guns on takeover of AdBri

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Boral declines to bow to Wednesday's advice from the ACCC to abandon its takeover plan or face legal action.Photo:Brendan Esposito

Boral has refused to concede defeat in its $1.07 billion takeover bid for Adelaide Brighton after yesterday defying the Australian Competition and Consumer Commission by keeping its offer on the table.

Investors were less confident, however, sending AdBri shares down 21 per cent in response to the competition watchdog's rejection.

The shares fell 32¢ to $1.17 before closing at $1.19 - well below Boral's $1.60-a-share offer and only marginally higher than the $1.14 at which they were selling before Boral launched its offer in December.

In a further sign that Boral may contest the decision in the Federal Court, the company said the offer to Adbri shareholders stood, adding that it would give the ACCC three days' notice if it intended to go ahead with the takeover.

Boral shares fell 21¢ to $5.71 before closing at $5.80 as investors wrote off the estimated cost benefits of the deal, which are valued up to $25 million a year.

Yet ABN Amro's Andrew Dale said the sell-down in both stocks was a buying opportunity, given that both were on track for another full-year record profit.

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Even if the deal didn't go ahead, Mr Dale said, Boral could keep its 19.9 per cent strategic stake in AdBri.

Boral has acceptances for 43.4 per cent of AdBri.

In a note to clients, JP Morgan's David Leitch retained his forecasts on Boral. He said the main damage was to sentiment.

"(Boral) remains one of the cheapest stocks in the Australian market and we are comfortable with our 'overweight' call despite the risks of global interest rate rises and the impact they will have on consumers and housing starts," he said.

But for AdBri shareholders, Credit Suisse First Boston warned the 25-30 per cent overhang stake of the former majority owner, British-based RMC, was "likely to result in a significant share price sell-down".

ABN Amro's Andrew Dale said the sell-down in both stocks was a buying opportunity.

CSFB, downgrading its 12-month target price for AdBri to $1.20 a share, in a note to clients said the five-month ACCC inquiry into the deal "must clearly have disadvantaged" the company operationally.

Despite forecasting AdBri would post a record full-year net profit result of $62.1 million, CSFB said: "Getting back to business should prove a strong challenge."

The ACCC believes a merged Boral-AdBri entity would significantly dilute the competitive position of smaller independent producers or importers. It is thought not to agree with Boral's position that cement imports would counterbalance a market being controlled by Boral-AdBri and Cement Australia, co-owned by Holcim-Rinker-Hanson.

If the deal was allowed, Boral would control about 55 per cent of Australia's cement production, 8.6 million tonnes.

Boral has argued that the "substantial excess" of cement production in South-East Asia (50 million tonnes a year) poses a big import threat, but some detractors to the deal argued that the excess capacity could soon be swallowed up by the expanding Chinese economy.